fixed exchange rate

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Fixed exchange rate

A country's decision to tie the value of its currency to another country's currency, gold (or another commodity), or a basket of currencies.

Fixed Exchange Rate

An exchange rate for a currency where the government has decided to link the value to another currency or to some valuable commodity like gold. For example, under the Bretton Woods System, most world currencies fixed themselves to the U.S. dollar, which in turn fixed itself to gold. A government may fix its currency by holding reserves of the peg (or the asset to which it is fixed) in the central bank. For example, if a country fixes its currency to the British pound, it must hold enough pounds in reserve to account for all of its currency in circulation. Importantly, fixed exchange rates do not change according to market conditions. It is also called a pegged exchange rate.

fixed exchange rate

An exchange rate between currencies that is set by the governments involved rather than being allowed to fluctuate freely with market forces. In order to keep currencies trading at the prescribed levels, government monetary authorities actively enter the currency markets to buy and sell according to variations in supply and demand. Compare floating exchange rate. See also devaluation.
References in periodicals archive ?
This is more than enough for Saudi Arabia to cover its import needs, support any future external debt requirements and defend its currency peg.
Due to the currency peg, monetary policy set by the US Federal Reserve has to be imported, Eke said.
75 percent and spent DKK275bn to defend Denmark's currency peg to the euro since January.
When growth is strong and the majority of the country's trade is with the United States, the currency peg holds.
He explained this was his personal decision that resulted largely from political speculations about how his joining the cabinet would affect the currency peg, and respectively, the economic stability in Bulgaria.
Plamen Oresharski, the man most likely to form Bulgaria's next government, pledged in an interview with Reuters on Sunday to spend more to help society's most deprived, but said he would keep public debt low enough to maintain the currency peg to the euro.
While some countries have engaged in a "currency war" to eke, out short term growth, Hong Kong s currency peg has deprived it of the option of currency devaluation.
It should be seen as a risk in Bahrain, when you import this through the currency peg.
The UAE central bank reiterated its support for its currency peg to the U.
The government froze public pay and pensions and slashed public spending to stop the budget deficit spiralling out of control and to preserve the country's currency peg to the euro.
Summary: RIYADH: Saudi Arabia is worried that a global rise in food prices may drive up inflation but still remains committed to its dollar currency peg, the OPEC member's central bank governor said Monday.
Hong Kong leader Donald Tsang said Thursday the territory will not consider changing its currency peg with the U.